Ideas

Whatever I feel like talking about.

Wednesday, October 22, 2008

A Small G1 Problem

One of the things I use a cell phone/PDA for is as a pocket library. The G1, however, has no word processor except for one online, which doesn't help in an airplane, although that problem is seupposed to be fixed realsoon now.

No problem. It has a browser. Save a book in HTML to the microSD card, read it on the browser.

Except that the browser can only access URLs, not files.

One other problem. When I try to write a blog entry, the G1 interprets anything I type as a google search.

Which is why this post is being written in the "edit HTML" tab of blogger.

Tuesday, October 21, 2008

A G1 Problem

Tomorrow morning, if all goes well, I will become the owner of a G1, a high end cell phone built by HTC, sold by T-mobile, using software from Google. In an earlier post I described some of the things I liked about it.

There is, however, one problem. Immediately after getting the phone, I am flying to London. When I asked T-Mobile support about the use of the phone for data abroad, I was told that the charge is $15/megabyte. That for a phone with a claimed download rate of almost a megabyte a second.

It wouldn't be so bad if the issue were only web browsing. I expect to be staying mostly in hotels with WiFi, so can connect over that, from the phone or, more likely, my netbook. But I was very much looking forward to using the GPS feature of the phone, wandering around London with a magic map of the city in my pocket showing where I was.

I don't think that is going to be a practical option. The G1, unlike a dedicated GPS device, doesn't have its maps in memory, it downloads them as needed. Wandering around London at $15/megabyte could get expensive pretty fast.

The obvious solution is to get a temporary SIM card from a british carrier, such as T-Mobile's own British operations. As best I can tell, that would give me unlimited internet usage for a pound a day, which I would be more than happy to pay. But the G1 comes locked, which apparently means that not only can I not use it with a SIM card from another network, I can't even use it with a SIM card from T-Mobile's British operations. So it looks as though I am going to have to wait until I get back to the U.S. to get much use out of my new toy.

Radio Interview on Future Imperfect

Saturday, October 18, 2008

Flight Schedules and Jet Lag

In less than a week I am flying from San Francisco to London via Paris, spending a week or so giving talks, then coming home. So naturally, I've been thinking about jet lag and how to deal with it.

My fight arrives in Paris at about 2 A.M. California time, which is the time my body will still be on. If I'm very lucky I might get to sleep by 11 P.M., which is quite early for me, and get a couple of hours of sleep before they wake us up for breakfast and landing. More likely it will be one hour or less.

Suppose the flight left about seven hours later. The people who are paying my expenses generously bought me a business class ticket, which means almost fully reclining seats, so with luck I could get about eight hours sleep. But I would then arrive in Paris, rested, at about 6P.M. Paris time. My chance of getting to sleep at anything close to an appropriate time that night would be close to zero, with the result that it would take me several more days to adjust my sleep schedule to my new location.

I conjecture that the optimal schedule, for me, would be somewhere between those two. Leaving about three hours later than my current timing would give me about four hours sleep and get me to Paris, short of sleep but functional, at about 2P.M. With reasonable luck I could get to sleep not much after midnight and be functioning on something close to Paris (actually London) time the next day.

Does that look right to other people? If so, would it make sense for airlines to arrange their schedules accordingly? They know that essentially everyone flying from San Francisco to Paris is going to be facing a jet lag problem, so why not adjust their schedules to deal with it as best they can?

Friday, October 17, 2008

The Android G1

As some readers of this blog may remember, I have long been looking for a suitable pda/cellphone/web browser to replace my aging Nokia 9300 and fill the gap in my life left by the demise of the Psion pda's. Yesterday I finally got a chance to play with the new G1, a phone about to be available from T-mobile, made by HTC, running Google's Android software.

It is very impressive. One of the limits to my present phone is that it does not have 3G and connects to the web rather slowly over EDGE. The T-mobile sales clerk told me that, for some unknown reason, 3G was not working in the store, so I could only use the EDGE connection of the G1. But using EDGE, it was strikingly faster than my current phone on EDGE. I don't know if that reflects the phone or the network. That's important, because although the G1 has 3G, no network has much 3G coverage outside of major metropolitan areas.

The keyboard is small but quite usable for thumb typing. The screen is a little smaller than an iPhone screen, bigger than most others, very sharp and usable. The software felt very smooth and the UI quite nice.

In part, I may be being impressed by the difference between a current high end cell phone and my several year old one. For instance, the G1 has GPS, providing a standard map version, a satellite photo version, a version showing where there are traffic problems, and a streetview version which is fun, although I'm not sure how useful--all of which I gather that other high end phones have too. But overall, the G1 was the first phone I have seen that felt much better than what I have--unlike the Nokia E90, which is more or less the successor to mine and, on net, worse.

Two of the things I use my present machine for are reading books and going over my manuscripts noting things I want to fix. Android currently does not have a word processor, which is a possible problem. One solution, so long as I have an internet connection from the phone, is to put my manuscripts on Google docs and edit them there--but that doesn't help much if I'm in an airplane over the Atlantic, as I will be in a few days. A second solution, for reading but not, I think, editing, is to save books in HTML and then use the browser on the G1 to read them.

Another thing I occasionally use my present machine for is to connect my Macbook to the internet by bluetoothing it to my phone, which is connected via EDGE, set up the Macbook as a WiFi modem and so provide my kids in the backseat of the minivan as we drive across the country each summer with a rolling hotspot--although a very slow one. The G1 itself has WiFi, so in principle I could cut out the middleman--link the G1 to the internet via EDGE or 3G, turn it into a WiFi modem, and connect the family notebooks through that while travelling. Unfortunately the software to do that, although I gather it exists for some other phone operating systems, doesn't appear to exist yet for Android.

I expect both of these problems to be temporary. Android is open source, both the word processor and the tethering software are things lots of other people want, so they should soon appear.

The remaining issue is actually getting myself a G1. That will require me to show up by 8:30 Wednesday morning, when they start handing them out, at a local T-mobile store, switch from AT&T to T-Mobile, and get all three of the family cell phones set up for the new network.

Which would be easier if I weren't planning to get on an airplane Wednesday afternoon and fly to London via Paris. But I think I'll try to do it anyway. Just the thought of wandering around London with a map of the city in my pocket that magically shows me where I am and tells me how to get to where I want to go ... .

Tuesday, October 07, 2008

Marginal vs Average Tax Rates

Both candidates claim to be in favor of cutting taxes, although Obama's people concede that his plan would raise taxes on a small minority of very high income tax payers. But a recent study from the Tax Foundation finds that both candidates' proposals would raise marginal rates for many middle income tax payers. Can both claims be true? If they can, which matters?

The answer is that both can be true and both matter. What the candidates claim is that most individual taxpayers will pay less money under their plans. That may well be true, at least if we look only at income taxes and ignore indirect effects on taxpayers of other proposed changes in the tax code. If you want to know much poorer you will be with a given income as a result of having to pay taxes, that is the fact that matters.

On the other hand, if you want to know how much poorer the country as a whole will be as a result of their plans, the marginal rate may be more important. It tells you how much you will be able to keep of each additional dollar you earn. That is one of the things that affects your decision, and other people's decision, of how hard to work at doing things that they can paid for, what quantity of goods and services to produce. It's also one of the things that affects the decision of how much effort to put into avoiding taxes, whether in legal or illegal ways.

If the point is not obvious, consider a very simple and highly graduated tax system. The rate is 0% on the first $40,000, 100% on everything above that. Faced with that set of rates, most people now earning more than $40,000 would cut back by working fewer hours, taking longer vacations, accepting pleasanter jobs with lower wages, or in any of a variety of ways reducing their income to $40,000. The only reasons to earn more than that are that you like contributing money to the government or that you enjoy the work enough to do it even when you are no longer being paid for it.

Everyone currently earning $40,000 or less and some people now earning more than that would pay less in taxes under that system than under a more conventional set of rates. But the country as a whole would be much worse off, because we would be producing and consuming a lot less. And, of course, the government would be collecting very little in taxes.

The same holds for less extreme versions. High marginal rates give taxpayers an incentive to substitute leisure for income even when the value of what they could produce is more than the value to them of the leisure, since they are only getting part of that value. That is a part of what economists refer to as the dead weight loss due to taxation—a cost to the taxpayer that is not matched by revenue to the government.

How does Obama manage to lower average rates while raising marginal rates—in some cases, according to the Tax Foundation, to over 50%? He does it by lowering taxes at the low end of the income scale—to well below zero.

If, using invented numbers to explain the logic of the situation, a taxpayer with zero income receives $10,000 from the government and a taxpayer making $20,000 receives and owes nothing, then raising your income from zero to $20,000 makes you only $10,000 better off, corresponding to a marginal rate of 50%. And if you only start paying taxes at $20,000, then the rate above that has to be higher than if you started at (say) $10,000 in order to bring in the same amount of money from a taxpayer making $30,000.

Some readers may find a graphical explanation of the point useful. The figure shows two different tax systems, each in the form of a graph of after tax income as a function of before tax income. The red line is a flat rate tax; everyone pays the same fraction of his income. The blue line is a flat rate tax plus a demogrant, meaning that everyone starts at income zero with a fixed amount of money from the government and pays a fixed fraction of each additional dollar of income to the government. As you can see, everyone on the graph ends up with at least as much money after taxes under the blue system.The slope of the blue line is lower; for each additional dollar you earn your after tax income goes up by less than it does on the red line. That corresponds to a higher marginal rate. So your incentive to earn income is less under the blue system.

Everyone is paying less under the blue system, so the government is collecting less money. But it is collecting it in a way that has a larger negative effect, a greater excess burden aka deadweight cost, on the total amount that taxpayers choose to earn.

[I have focused on Obama's proposal because it is easier to explain its logic, but according to the Tax Foundation both plans raise marginal rates for many middle income taxpayers.]

Monday, October 06, 2008

No Neutrals

One interesting--and irritating--feature of online argument, especially in an election year, is the routine assumption that everyone is on one side or the other and that which side you are on determines what you say. If you say something favorable about Governor Palin you must be a Republican supporter and are therefor obligated to respond to any argument offered against Senator McCain. If you say something favorable about Obama you must be a supporter of the Democrats and obliged to defend Obama against any and all arguments.

I am not supporting either ticket. When I commented on my blog that I thought Obama was the least bad candidate and offered some reasons why, with luck, he might actually do some good things, I promptly got labelled in a variety of places as having endorsed him. When I spent a number of blog posts here commenting on the election, some of them defending Governor Palin from blatantly dishonest quotations out of context, at least one blogger found it suspicious that I was saying so much in defense of the Republicans. In one recent online argument a poster simply refused to believe my statement that I didn't plan to vote for McCain. It was obvious to him that only someone committed to the other side could possibly question his side's version of the particular issue we were discussing.

In another argument on a different newsgroup, I pointed out that Biden had misrepresented the role of the Vice President as set out in the original Constitution. The poster who responded apparently thought I was defending Dick Cheney's claims as to where in the governmental structure he belonged and what privileges he got thereby. I have not actually paid much attention to that issue, and in any case the role of the VP may possibly have changed over the past two hundred plus years, especially after the Twelfth Amendment created our present system of electing a paired President and Vice President. Biden had cited Article I of the Constitution, Article I directly contradicted what Biden had said, and that told us something about Biden, whether or not it had any relevance to Cheney.

Part of the explanation of the pattern is, I think, the natural human tendency, probably hardwired, to view the world in terms of in group and out group, us and them. If I defend Palin or point out Biden's errors I am obviously not part of the Obama in group so must be on the other team.

There may be a second element. Most people are not very interested in political, economic, historical matters. But most people do enjoy cheering for their team. So political arguments, especially online during an election year, are populated by a lot of people who are arguing not because they are interested in the ideas but because it is a way of fighting for their side. It is natural enough for them to assume that everyone else is doing the same thing.

Palin's Future

Assume, as now seems likely, that Obama wins the election. What happens to Governor Palin? Does she sink back into obscurity as governor of a small state or does she become the leader of a major wing of the Republican party and a future candidate for Vice President or even President?

To a considerable extent, one's answer depends on how one views her performance this time around. Opponents argue that she has shown herself to be ignorant, incompetent, clearly unsuited for high office, but their view will have little influence on her future in the Republican party. What matters is whether she comes out of the election still popular with the party faithful.

Dumb Facts

It is sometimes said that facts speak for themselves, but mostly they don't. Media reports on the relation between the bailout and the stock market provide a striking example. When the House voted down the bailout and the market fell, the fall was reported as a response to the failure. When the House passed the bailout and the market fell, the fall was reported as occurring in spite of the passage of the bailout. In this case as in many others, once you have your conclusion you can always arrange for all evidence to support it, or at least be consistent with it.

Global warming provides another example. If the weather somewhere is warmer than usual, that is evidence of global warming; the fact that total global warming in the past century comes to under one degree centigrade is not usually mentioned. If the weather is colder than usual that is either irrelevant or evidence of changing weather patterns due to global warming.

It used to be said that the poor agricultural performance of the Soviet Union was due to worse than average weather—forty straight years of it. No doubt it was true. In a country that big, the weather is always worse than average somewhere.

Saturday, October 04, 2008

The Job of the Vice President

One of Biden's less obvious recent mistakes was the claim that Article I of the Constitution supported the idea that the VP's job was primarily executive. Article I deals entirely with the legislative branch and describes the VP as president of the Senate. Article II deals with the executive. All it says about the VP is how he shall be elected, how he can be removed from office, and in what circumstances he becomes President. In the system as originally designed, the VP's responsibilities are entirely legislative until and unless he becomes President, executive thereafter.

That does not describe current practice. The VP has become, to differing degrees in different administrations, a sort of assistant President. In some cases that means primarily ceremonial duties—Hubert Humphrey under Johnson, as immortalize by Tom Lehrer in "Whatever Became of Hubert?" In other cases, most notably Cheyney under Bush, the VP is sufficiently active to be viewed by critics as the puppetmaster controlling the President.

In part this reflects the striking difference between the original system for electing a VP and the current system. Initially the VP was simply the presidential candidate who came in second. Each elector got to vote for two candidates, so on a strict party-line vote the President could choose his Vice President by telling the electors who supported him whom to cast their second ballot for. But if some electors cast their second vote for their second choice rather than for the candidate endorsed by their first choice, the most popular candidate would end up as President and the second most popular might well end up as Vice President. In such a situation, there would be no reason to expect the President to view the Vice President as someone he wanted on his team.

All of which raises the interesting question of what things would be like if the Twelfth Amendment, which set up the modern system, had never been passed. There would probably still be parties and a party could still run two candidates. But the final outcome might pair up the two presidential candidates as President and Vice President, it might make make the "Vice Presidential candidate" (insofar as there was one--the candidate who the party ranked second) President and the Presidential candidate VP, it might pair up a presidential candidate of one party with the VP of the other. Barack Obama and Sarah Palin, for instance, would make an interesting administration.

One disadvantage of that system would be the increased risk of assassination if the President and Vice President were from different parties. One advantage, arguably, would be increased fairness. In a close election under our system, half the voters get the candidate they want, half get nothing. Under the old system, half get ninety percent of an administration, half ten percent—assuming that, on average, the VP spends ten percent of his term as President.

What if Neither Candidate is Eligible?

I recently came across a rather bizarre news tidbit online. Apparently, a few days before the Democratic convention, a Clinton supporter filed a suit claiming that Obama was not a natural born U.S. citizen, hence not eligible to be President. The judge refused to act immediately to forbid the Democrats from nominating him but did not dismiss the suit, which I gather is still in progress.

Two different arguments have been offered in the controversy. One, which seems to hinge on technicalities and isn't very interesting, has to do with whether Obama as a child got Indonesian citizenship due to having an Indonesian stepfather.

The other is the stuff of which novels are made. The claim is that Obama's mother, late in her pregnancy, tried to fly back to the U.S. from Kenya, where she was with her husband's family, but was unable to because the airline had a policy against carrying women who were near term and so might give birth while in flight. The result was that the baby was born in Kenya, brought back to Hawaii shortly thereafter, and the birth registered in Hawaii. The evidence offered for the story is, I gather, testimony, or at least purported testimony, by relatives of Barack Obama's Kenyan father.

While googling around for more information, I came across another story along somewhat similar lines. Apparently it has been argued that McCain is not eligible, because he was born in the canal zone, which is at best ambiguously American. As best I can tell, it really is an open question, although most experts are inclined to think he does qualify. Snopes has an interesting discussion.

A California lawsuit arguing that McCain should be removed from the California ballot was dismissed by the judge:

"This order finds it highly probable, for the purposes of this motion for provisional relief, that Senator McCain is a natural born citizen.

Plaintiff has not demonstrated the likelihood of success on the merits necessary to warrant the drastic remedy he seeks," Alsup wrote.

Furthermore, "plaintiff has no standing to challenge Senator McCain's qualifications," the judge wrote. "Plaintiff is a mere candidate hoping to become a California elector pledged to an obscure third-party candidate whose presidential prospects are theoretical at best. Plaintiff has, therefore, no greater stake in the matter than a taxpayer or voter."

Which leaves open the possibility that a different plaintiff, seeking a less drastic remedy than immediate removal from the ballot, might yet prevail. I also found references to a New Hampshire lawsuit, but not to its outcome.

All of which raises a possibility, admittedly unlikely, that is both entertaining and disturbing. What if a court finds, shortly before the election, that one or both of the candidates is ineligible? What if one of the candidates wins and a court then finds that he was ineligible? Assuming the result is sustained on appeal, does the presidency go to the losing candidate, to the winning candidate's vice president, or to someone else?

The Supreme Court's role in the 2000 election produced a certain amount of controversy; one can imagine the response to a scenario where it ends up being asked to eliminate a candidate after he has been elected on the grounds of disputable historical facts or legal arguments.

Thursday, October 02, 2008

Biden on Separation of Church and State

Palin and Biden were apparently both asked about separation of church and state—I don't know the context, but someone pointed me at the video. Palin doesn't say much of interest—largely standard rhetoric about the wisdom of the people. Biden is more interesting.

He suggests that we look at "every state where that wall is not built. Look at every country in the world where religion is able to impact on the governance. Almost every one of those countries, there's real turmoil."

Taken literally, the "impact" part describes all countries, including the U.S.; there is nothing in American law that prevents a voter from voting for or against a candidate or measure on the basis of the voter's religion. But suppose we take "that wall is not built" to mean, as the context of the answer suggests, countries where there is no legal principle of the separation of church and state. Perhaps I missed it, but where is the turmoil in England, where Anglicanism was the established religion when the Constitution was written and still is? In Argentina, Bolivia, Costa Rica, El Salvador, Lichtenstein, Malta, Monaco, Vatican City and parts of Switzerland where Catholicism is the established religion? In Denmark, Norway and Iceland where Lutheranism is the established church? In Greece where the official church is Eastern Orthodox?

It isn't surprising that Biden doesn't know about the established churches in Scandinavia, although that England has an established church is hardly an obscure historical fact. What strikes me here, as with the FDR comment he made earlier, is the impression that, faced with the need for facts to support his current argument, he simply invents them. He was presumably thinking of Muslim countries, which do not, with the notable exception of Turkey, have any principle of separation of church and state. But his argument required that almost all other countries follow the U.S. pattern, so he simply assumed it. That's a little disturbing—and reminds me a bit of Bush.

An Interesting Discussion of the Sources of Income Inequality

I don't usually use posts here to point at other people's posts elsewhere, but I just read a thoughtful discussion of the sources of increasing income inequality in a piece by Schultz and Kling and think some of my readers might find it interesting.

The Price of Money and Other Errors

It is common for people who think they understand economics to describe the interest rate as the price of money. If it were true, then printing more money would lead to lower interest rates, and many of the same people think it does.

The next time someone tells you that the interest rate is the price of money, ask him what he thinks a reasonable interest rate is and offer to buy some money from him—at ten cents on the dollar if the rate he suggests is ten percent. As that example illustrates, the interest rate is not the price of money. The price of money is what you must give up to get it. If apples cost fifty cents each, the price of money is two apples. More generally, the price of money is the inverse of the price level—when prices are high, that means that money is not worth very much.

The interest rate is the rent of money measured in money. Suppose you borrow a hundred dollars at ten percent. If the price of a dollar is two apples, you are borrowing the price of two hundred apples and paying the price of twenty apples a year in interest. If the money supply doubles, prices double, including the price of an apple, you are borrowing the price of a hundred apples and paying the price of ten apples a year in interest. If you prefer, you could do the same real transaction as before by borrowing two hundred dollars and paying twenty dollars a year interest, still at ten percent.

As this example suggests, there is no connection between the amount of money in circulation and the interest rate. There is a connection between the rate of change of the amount of money in circulation and the interest rate, but it goes in the opposite of the direction implied by the error I am discussing. When the money supply is increasing and prices are rising, nominal interest rates are high, not low, because lenders must be compensated for the fact that they will be paid back in dollars worth less than the ones they lent.

Much of the confusion here comes from the multiple meanings of the term "money." When we say someone has lots of money, we don't usually mean that he has a lot of green paper or a large balance in his checking account; we mean that he is wealthy. His wealth might be in money, it might be in valuable real estate, it might be in stocks and bonds. If there is lots of money in that sense—more precisely, if lots of people have wealth they would like to lend out—that will tend to lower interest rates. But that has nothing to do with the amount of money in circulation.

What brings up this particular confusion at the moment is the attempt to link the current crisis with the events that led to the Great Depression. Those events produced a sharp drop in the money supply, due to banks going broke and depositors either losing or withdrawing their deposits. Given the nature of a fractional reserve system, replacing a mix of currency and deposits with just currency reduces the total amount of money in circulation, in that case by a lot. The problem could have been prevented if the Federal Reserve System had kept those banks from failing, which was part of the purpose it had been set up for, a purpose that had been served earlier by the private arrangements among banks that it effectively replaced.

That series of events cannot happen now because the FDIC insures bank deposits. What we are observing is not a drop in the money supply. It is a loss of wealth, as firms discover that their assets, in particular mortgages and securities backed by mortgages, are worth less than they thought. That explains why the proposed bailout is enormously greater than would be required to prevent a run on bank deposits. $700 billion is roughly half the total money supply of the U.S. (M1—currency plus checking accounts and similar assets)--and about half of that is currency, which isn't going to vanish whatever happens to the banks. The total wealth of the economy is enormously greater than the total amount of money in the economy, and the bailout is a response not to a reduction in the amount of money but a reduction in the amount of wealth.

That also explains why the bailout has very little to do with preventing another Great Depression. The U.S. money supply at the moment is at or near its all time high, and it is hard to see how anything likely to happen, with or without a bailout, will reduce it by much. The mechanism that set off the Great Depression isn't happening.

What is happening is the failure of lots of firms. The failure of a firm doesn't wipe out wealth, except to the extent that the firm itself—its firm culture, web of relationships and such—has some value. When a firm fails, that is at least some evidence that that value was negative, which is why nobody chose to buy out the firm and keep it going. The ordinary assets of the firm—its buildings, land, stocks, bonds, mortgages, and whatever it owns—don't vanish when the firm fails, they get sold to someone else.

The bailout is not a way of preventing the loss of value. The loss (or transfer) of value occurred when people made bad mortgage loans. What happened more recently was the recognition of that loss. All the bailout can do is to shift the loss from some people to others, from the stockholders and creditors of firms that are now effectively bankrupt to the taxpayers.